OIL FUTURES: Crude Up In Asian Trading As US Dollar Weakens

DavidWinning

SYDNEY (MarketWatch) -- Crude-oil futures rose in Asia Wednesday as the U.S. dollar weakened, but the market's advance was limited by an industry report showing a big build in U.S. crude stockpiles and demand for products at its worst level in weeks.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November traded at $75.46 a barrel at 0621 GMT, up 49 cents in the Globex electronic session.

That meant the spread with Brent crude on London's ICE Futures exchange narrowed, with the Brent November contract up 9 cents to $78.51 a barrel.

Support for Nymex crude came largely from the currency markets, where the euro strengthened to $1.3298 against the dollar, from $1.3247 earlier in the trading day. Oil becomes cheaper for holders of other currencies as the dollar weakens.

Appetite for dollar holdings weakened after the Federal Reserve said Tuesday it was "prepared to provide additional accommodation if needed" to help the U.S. economy recover.

"If the oil market continues to go up, then the upside will be limited around $76 as inventories remain pretty high and we are yet to see a strong rebound in the global economy," said Ken Hasegawa, an analyst at Newedge Japan.

Worries about a supply overhang in the U.S. intensified after the American Petroleum Institute, an industry group, reported a 2.2 million-barrel increase in crude oil stockpiles over the past week versus analysts' expectations of a 1.7 million-barrel draw.

U.S. gasoline stocks rose by 2.4 million barrels, while distillate inventories saw a 2.5 million-barrel increase.

However, analysts were skeptical of the accuracy of the API data, and expect an oil inventory report from the Department of Energy due at 1430 GMT to be less bearish.

"The API reported crude imports up 310,000 barrels per day from the prior week. This is hard to believe when the key Enbridge pipeline for Canadian imports was shut down for the whole reporting week and it was running at 450,000 barrels per day before it was shut," said Torbjorn Kjus, an oil analyst at DnB NOR Markets.

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